Sri Lanka - Fiscal indicators, Government debt

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Inflation, measured by the year-on-year increase in the Colombo consumer price index, continued to remain in single digits during 2012, averaging 7.6% for the year (Figure 3.21.2). However, inflation rose to around 9% in the second half with pressure on nonfood prices coming from increases in government-administered prices for fuel and electricity in February 2012 and the depreciation of the Sri Lankan rupee. Food inflation also increased during the year as import duties were increased on selected food items and domestic food supplies were disrupted by drought and flooding The budget deficit is estimated to be 6.2% of GDP, exactly in line with the 2012 target (Figure 3.21.3). This was achieved, despite lower-than-expected revenues, by reducing budgeted current expenditure; capital expenditure was slightly lower than the targeted 6% of GDP. Revenue including grants is estimated to equal 14.2% of GDP, slightly lower than budgeted and less than in 2011. The shortfall was mainly due to lower value-added tax collections owing to slower growth. The ratio of government debt to GDP rose to 82.6% in September 2012 from 78.5% at the end of 2011 owing to the impact of rupee depreciation on the value of foreign currency-denominated debt and increased borrowings, mainly through Treasury bills, to cover the budget deficit (Figure 3.21.4). Sri Lanka is now categorized as a middle-income country, and as such needs to reorient its planning and policy framework to suit the requirements of a middle-income country, drawing on the experiences of other Asian countries, and international best practices. Sources: Central Bank of Sri Lanka.Annual Report 2011. http://www.cbsl.lk; Ministry of Finance and Planning and the Treasury of Sri Lanka. Budget Speech 2013. http://www.treasury.gov.lk
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